When intermediaries are involved in complex projects, it is important that they fully understand how the legal relationship with suppliers is created. This will avoid someone who means to contract as an agent from unwittingly being liable as a principal.
ITIC - International Transport Intermediaries Club – recently settled a case where a shipmanager was caught up in a dispute between a supplier of grabs and an insolvent owner.
The shipmanager was supervising the build of two new ships in a Chinese yard and had arranged the purchase of two grabs, assuming they were acting as an agent on behalf of the owner. However, the owner became insolvent before either of the ships were delivered and the supplier of the grabs held the shipmanager responsible for payment claiming they had ordered the grabs directly and in their own name. The claim was for the cost of the grabs, US$710,000, plus interest.
The shipmanager’s lawyers believed that their position as agent of the owner had been made sufficiently clear prior to purchase and that the circumstances and context of the purchase was such that confusion over the shipmanager’s role should not have arisen. On this basis, it was decided to defend the claim.
Meanwhile, the yard itself also became insolvent. As a result, neither the supplier nor the shipmanager were able to recover the grabs.
The matter was eventually heard by a court who found in favour of the supplier. The court believed that the shipmanager could not demonstrate that the order for the grabs had been made in the name of, or on behalf, of the owner. The judgement was for US$900,000. This was appealed and eventually the supplier settled at US$420,000. ITIC covered this cost as well as legal fees of US$70,000.
ITIC is particularly keen for intermediaries to understand when they are acting as an agent or a principal in situations such as this. Not knowing the difference can lead to expensive claims.
Please click here for ITIC’s circular on signing off on purchase orders as ‘agents only’.
For further information please contact:
Katerina Dimitropoulos, Navigate PR
T: +44 203 326 8463
International Transport Intermediaries Club (ITIC) is the world’s leading provider of professional indemnity insurance to transport professionals across the globe.
As a mutual insurer, it has over 90 years’ experience providing cover to companies in the marine, naval architecture, aviation, rail, offshore and hydrographic industries. With 2,900 members in over 110 countries and with a worldwide network of correspondents, ITIC is the acknowledged leader in its field.
ITIC’s insurance has been developed primarily to cover claims of negligence – errors or omissions. Cover can also extend to specialist areas such as debt collection, loss of commission income, cyber liability, cash in transit and directors’ and officers’ insurance. ITIC’s wide cover also includes a unique discretionary insurance which could support claims not normally be paid by other professional indemnity insurers.
ITIC is managed by Thomas Miller. More details about ITIC and the services it offers can be found at www.itic-insure.com